Urgent action is needed to rationalise Bangladesh's tax and tariff regimes. This is crucial to efficiently integrate the country's business and production chain with the global value chain. By expediting a rational, transparent, and efficient tax, tariff, and trade facilitation regime, we can meet the growing challenges of post-graduation obligations and global trade competition. It is imperative to reform tax and tariff laws in line with global best practices and our international obligations.
According to the World Tariff Profiles 2024 (jointly published by WTO, ITC, and UNCTAD), Bangladesh's simple average Most Favored Nation (MFN) applied tariff rate is 14.10 per cent against the bound rate of 155.10 per cent, and the binding coverage is 17.60 per cent.
Harmonising applicable direct and indirect taxes with all sectoral local and foreign investments, without discrimination, can bring about significant benefits. This includes normal direct tax on capital gains, royalties, technical know-how and technical assistance fees, and facilities for their repatriation. Such harmonisation can create a more conducive environment for investment and economic growth.
It is crucial for the government to identify and implement necessary steps to strengthen domestic resource mobilisation. This is a key factor for sustainable and inclusive socio-economic development, and it is essential that we take proactive measures in this area.
Rationalising the tariff structure is also important with inter-sectoral policy cohesion and bond facilities to promote a cost-effective production chain for export as well as domestic consumption.
There is also a need to rationalise and simplify the customs procedures by harmonising with the WTO Agreement on Customs Valuation, Trade Facilitation Agreement (TFA), and the provisions of WCO to promote and reduce the cost of doing business.
Setting up central warehouse facilities for sourcing, storage and supply of Indigenous and imported raw materials to industries in sector-specific clusters is also critical
A proactive action plan may be devised with the trading partners for respective Customs Cooperation Agreement to facilitate mutual trade as envisaged in the WTO TFA and WCO protocols and annexes including gradual harmonisation of customs documentation and clearance procedure for transit and trans-shipment of goods across the borders.
Update and harmonised trade facilitation regulatory regimes, including mutual tax treaties (pay where you earn), dispute settlement measures, access to public procurement practices, etc, are also works to be done. These should be synchronised with the trading partners upholding the global principles of MFN and National Treatment.
Work also needs to be done to harmonise customs duty (CD), regulatory duty (RD), supplementary duty (SD), and other taxes with the National Treatment Provision of the WTO and other reciprocal mutual obligations with trading partners as and when required.
To discourage permanent revenue protection-based industries, revenue protection given to nascent industries should be phased out to normal tariff within eight years, and industries in general should be integrated with the global value chain under a sustainable rationalised tariff structure that expedites the free flow of goods and services across the borders.
There is also a need for sustainable policy cohesion for exports. These include: (1) Withdrawal of all duty, VAT and SD, if any, from all export products and services, including all inputs thereof, whether imported or locally produced; (2) Set up online single window customs clearance, duty payments, and duty drawback on exports and deemed exports, including all refunds on AIT, AT, and VDS as and when applicable; and (3) Withdrawal of indirect taxes from the utility bills (electricity, gas, water and digital services) of the productive sectors.
Production and manufacturing units should also be exempted from payment of AT & TDS, and double taxation through TDS and VDS, which are finally adjusted, should be discontinued.
Measures should also be taken to ensure technical and financial support for obtaining accredited certificates for exported and imported goods and services and obtaining global registration of our products and services' IPR.
To boost the integration of CMSMEs with the global market and compete with global e-commerce, Bangladesh, like China, India, Vietnam, and others, should take up projects to set up warehouses, distribution networks, and service centres in destination markets for easy and regular product delivery to wholesalers, retailers, and consumers.
The writer is Trade and Tariff Policy Adviser,
FBCCI 1980-2024. mahmed019@hotmail.com
A note on tax and tariff rationalisation in Bangladesh
Manzur Ahmed | Published: October 26, 2024 20:02:41
A note on tax and tariff rationalisation in Bangladesh
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